By Paul Jarvie, Manager Employment Relations and Safety
Demographics is the study of populations and the different groups that form them. The need for such data is important to both central and local governments when planning for future needs, e.g., number of schools, hospitals, doctors, transport, housing needs and town planning requirements.
From a business perspective, demographics identifies population trends, number of births and deaths, labour age groups, participation and employment rates, geographical locations of labour, territorial (regional) migration and immigration trends. This is vital to understand whether businesses are planning location changes or expansion.
From a general overview, countries need a birth rate of 2.1 births per eligible female to maintain a natural population growth rate. This figure ensures a consistent labour supply coming out of the schooling system against the normal death rate at the other end of the continuum.
At this rate, populations grow within population pyramids. The normal pyramid is a conical shape. That is, it has a wide base tapering off at the top. This infers more younger people and less elderly people at the top.
Around the world, population birth rates have been declining to the extent that in some countries (Japan, Korea, and China in particular), the pyramids have become kite shaped. That is a narrow base, wide upper middle and narrow top.
China has recorded its lowest birth rate in a decade, just 0.34 per cent. China’s population grew from 1.41212 billion to just 1.41260 billion (2021), an increase of just 480,000. The fertility rate has dropped from 2.6 in 1980 to 1.6 in 1994, and down to 1.15 in 2021. With these figures, we could see the population of China decrease to 587 million by the year 2100.
Compounding this is that people are living longer. Medicine, diets, and lifestyles are contributing to longevity. This means that population pyramids are moving from cones, through to inverted cones, e.g., more older people than younger people.
The estimated number of people aged 65 or older in Japan stood at a record high 36.4 million, an increase of 220,000 from a year before.
The share of those aged adults in the nation’s total population rose to a record 29.1 per cent, the highest among 201 countries and regions across the world. These figures are indicative of the worldwide challenge of an ageing population and decreasing birth rates.
The New Zealand population pyramid looks like a rectangle with a narrowing base. This is typical of an aging population with low birth rates.
Japan and China are trying hard to incentivise population growth, but their youth are not “buying in” to the marketing. The downward trend continues.
This change has major implications on labour supply.
Niger is the top country by rate of natural increase in the world. As of 2020, the rate of natural increase in Niger was 37.4 persons per thousand population that accounts for 1.63 per cent of the world’s rate of natural increase. The top five countries (Angola, Mali, Democratic Republic of the Congo, and Somalia) account for 7.11 per cent of it. The world’s total rate of natural increase was estimated at 2,287.85 persons per thousand population in 2020.
In New Zealand, our fertility rate has reduced to around 1.69. At this rate, we cannot sustain a natural population growth rate. This implies our supply of labour will not be found from within New Zealand, or at least not all of it.
Studies also indicate that in New Zealand, women (couples) are deciding to have children later in life, or not at all. Having children later puts a pressure on our short-term labour supply.
In New Zealand, we have been relying on immigration to increase our population figures. Pre-COVID, we were seeing around 70,000 new immigrants to New Zealand annually. This was immediately “turned off”, and we’re now only seeing around 5,000 – 7,000 each year.
“New Zealand’s total population increased by 32,400 in the year ended June 2021. As the graph below shows, this was a significant drop in comparison to the years previous, with 2019 totalling 78,600 and 2020 totalling 111,000”.
Source: ‘Lack of International Migration brings NZ Population to a Crawl – Berl.’
In New Zealand, we simply cannot rely on natural birth rates to increase labour markets to ensure growth.
As our population ages, we are seeing more older people remain at work. This should not be seen as unexpected. Often, remaining at work is a reality, they simply cannot afford to retire. Figures indicate home ownership for the older population is declining and those who are servicing mortgages is increasing. Living in rental properties is also increasing. Older people are also caregivers to their elderly parents or providing care for children and grandchildren.
Compounding this, we are in the middle of both a skill shortage and record unemployment levels, which is creating a perfect storm. There is simply no one else out there to work.
Employers need to drastically rethink how they view their older workers. There remains an attitude of when a worker attains the age of 65 (the age of entitlement to superannuation, not a retirement age) then conversations begin around what your plans are for the next stage of your life.
It is important to remember that as people retire, they stop paying income tax. As retirees draw down their superannuation payment, other employees need to continue working to contribute to that account. This is called the dependency ratio, e.g., the number of people between 15- 65 years (workers in the general senser), compared with those over 65. Up until recently, New Zealand had a 1:4 ratio, meaning there were four workers per retiree, however predictions indicate this may well reduce to 1:2.
In times of extreme need to attract and retain staff, why would anyone contemplate such thoughts? Your older workers will remain with you. Entertaining ideas of retirement should be the last thing you do.
It is well researched that ageism and older people biases are prevalent within both the workforce and the wider community. These myths have been repeatedly debunked:
- Older people can’t solve problems – evidence shows they are more effective and consistent
- They cost more – this is incorrect, as they are less likely to change jobs
- They use more sick leave – incorrect, they are half as likely to use sick leave
- They have poor memories – incorrect, ageing alone does not alter memory
- They have trouble learning new things – incorrect, they are highly motivated and have good attention spans
- They don’t care about careers – incorrect, your older workers are focused on more than just wages and salaries
- Older workers block other jobs – incorrect, research shows they actually create and increase new jobs
- People are not comfortable managing older workers, this can be overcome by internal training and mentoring
Ageism also applies to younger people who are wishing to enter the workforce. Remember, we were all young starters once.
Studies, both from the EMA and the Commission for Financial Capability (CFFC), found that less than 25 per cent of employers had plans to mitigate the ageing population, older workers and how to better retain and / or accommodate them. This is very worrying when there are no new workers out there.
Statistics NZ figures indicate there are more people over 55 years than those under 15 years.
In March 2022, the estimated working age population of 15–24-year-olds was 641,500 (15.5 per cent) compared with the over 55 -70-year-olds of 1,419,700 (34.5 per cent of estimated working population). This highlights the slowing of our labour supply.
Recent figures show the Auckland population is also shrinking for the first time. This is possibly due to people moving out of Auckland in response to the housing crisis and cost of living pressures. Other population losses were also noted in Invercargill, Buller, Ruapehu, Waitomo and Westland. People are also leaving New Zealand to head overseas to find better lives and work.
As a country, we must have a conversation around a population policy.
Participation rate is the proportion of working-age population who are in the labour market, employed or looking for work. Employment rate is the proportion of working-age population who are employed.
As at March 2022, the overall New Zealand employment rate was 68.2 per cent, and participation rate was 70.9 per cent.
“The participation rate for people in their 50s was 85 per cent in 2017. This will increase to 88 per cent in 2038, and 89 per cent in 2068.
In 2017, people in their 60s, the participation rate was currently 59 per cent, but this will increase to 64 per cent in 2038 and 67 per cent in 2068”. (Source – Statistics NZ)
What is to be done?
Employers must drastically alter how they view and value their labour force. They must not let older workers go, rather, they must find ways to retain and retrain them.
Having conversations with staff early on (from 35 plus) about their training needs and wants, what will it take to stay, and what could be changed in terms of work is going to be imperative going forward. Why? Because there are no other staff out there. It is vital to retain staff at all costs.
Workers, including new younger staff, are seeking flexibility. They have experienced this during COVID, and now wish to continue with it. We are more than likely going to see ‘hybrid working’ arrangements stay. This means, working from home and spending some time in the office. Some roles cannot be carried out remotely, so other flexibilities need to be considered.
Flexibility is not just about working hours. It can include working days, shifts, job sharing, extra leave and unpaid leave. It also means having some flexi time to take parents to doctors and making up time without taking formal leave. This time is often made up later. It is important that both the employer and the employee work out what is best for both parties.
Another important aspect to retaining staff is to introduce career advice. This allows the employee to test and discover what they need to do to remain employable within that sector, or to identify what needs to be done to move across sectors. This is going to be vital as the future of work (which is already here) changes jobs, the types of jobs, and how we participate in work. Many jobs these days will not be here in 5- 10 years’ time, especially if they are repetitive or require logical thinking.
If staff are our biggest asset (and they are), then providing them with a maintenance budget and a reskilling budget is vital. Older workers are an asset and will continue to provide good work performance along with sound life lessons.
EMA has long advocated in the older worker space. We see older workers as being a normal part of the workforce. They are even more valuable now with a national skills shortage and very low unemployment rates.
Age is a chronological construct and has little relevance to biological, psychological, and academic functions. Many so-called older people are fitter, healthier and more agile than some in the younger age groups.
Businesses are well positioned to use this latent potential labour force to their mutual advantage. In the United Kingdom, it was estimated that by encouraging older workers to stay on a couple of years after they turned 65 lifted the national GDP by 3- 5 per cent. This has major benefits all round.
In 2018, we researched and co-authored a white paper called ‘Act Now, Age Later – Unlocking the Potential of our Ageing Workforce’ with CFFC. This was in response to little Government action or direction at that time in the older worker space. Following the white paper, the Office for Seniors (within MSD) launched its strategic plan for older workers:
- “Better Later Life – He Oranga Kaumātua 2019 to 2034”, and the
- “Better Later Life Action Plan – He Mahere Hohenga 2021 to 2024”
Recently MSD (Office for Seniors) also released the ‘Older Worker Employment Action Plan’.
It’s great seeing these documents in the public domain, and seeing real, tangible outcomes is the real proof of the plans. This will only occur when businesses consider the older worker as being “normal” and that having older workers in your workplace is viewed as a benefit.
Takeaways:
- We are all living longer
- There is a worldwide lowering of the fertility rate
- Natural population increase is unsustainable
- Immigration has been “turned off”, so new migrant labour is hard to secure
- We (New Zealand) are competing on the worldwide market for scarce labour
- Retaining and retraining older workers is imperative
- Older workers do contribute to a healthy and productive workplace
- Engaging with all workers to learn what they need to keep working for you is vital
- Retraining and career advice is strongly advocated, and
- Identifying the flexibility that workers need will assist in retaining your workforce.
